ARIZONA STATE SENATE
Phoenix, Arizona
mechanics’ and materialmen’s
liens.
States
that lien priorities for site improvements on construction sites shall be
attached when work first starts or materials are furnished unless there is a
general contract for construction.
Background
Currently, businesses or individuals performing site preparation work are given a priority date concerning payment by the lender separate from the date of commencement of construction by a general contractor. According to representatives of the Land Title Association, many times, businesses or individuals performing site improvements find it difficult to collect payment because they are given a separate and often lower priority. Representatives of the Land Title Association feel that H.B. 2465 addresses this situation by allowing work for site preparation to be given the same priority date as the date on which contracted construction begins or materials are delivered. If no contract is entered into, the priority date for site improvements would remain separate from the date construction begins or materials are delivered.
If bills are not paid in full for labor, professional services, materials, machinery, fixtures or tools furnished or to be furnished, a mechanic’s lien leading to the loss, through court foreclosure proceedings, of all or part of property being improved may be placed against the property. If the lender included the cost of land acquisition or anything other than construction costs in the loan amount, the lender may not be considered a construction lender and any mechanic’s lien against the property may be ineffective in stopping further disbursements of funds by the lender. According to representatives of the Land Title Association, H.B. 2465 is intended to clarify the definition of construction lender to include the ability of the lender to include costs other than construction costs in the loan amount.
There is no anticipated fiscal impact to the general fund associated with this measure.
Provisions
1. Stipulates that a lien arising from an improvement at a construction site has same priority as the commencement of work performed or materials furnished under the general contract.
2. Clarifies that “construction lender” as it relates to preliminary 20-day notices means any mortgagee or beneficiary under deed of trust lending funds that are secured by a mortgage or deed of trust if the majority of which are intended to be used to defray all or some of the cost of the construction, alteration, repair or improvement, or any assignee or successor in interest of either.
3. Makes technical corrections.
4. Provides for a general effective date.
Prepared by Senate Staff
March 15, 2001